Business laws and regulations are very important from the UPSC exam point of view. They form a part of polity as well as economy. In this article, you can read about the Foreign Exchange Regulation Act (FERA), the draconian foreign exchange legislation, which was repealed and replaced with a more business-friendly regulation. FERA and the newer law FEMA are both important for the IAS exam.
FERA or the Foreign Exchange Regulation Act was a law passed in 1973. It imposed severe restrictions on the types of payments and the transactions in foreign exchange and securities, and those transactions that impacted the foreign exchange as well as currency import and export indirectly. The purpose behind the FERA was to regulate payments and foreign exchange. It also intended to conserve foreign exchange, better the usage of foreign exchange in order to boost the country’s economic development. In 1998, the Indian government repealed FERA and replaced it with the FEMA or the Foreign Exchange Management Act. FEMA is more liberal and it eased foreign exchange controls and lessened restrictions on foreign investment.
As per FERA, the RBI followed certain rules and regulations with respect to foreign exchange and foreign reserves such as:
- Restrictions on export and import of certain currencies
- Restrictions on illegal payments
- Restrictions in foreign exchange dealings
- Rules for the payment of exported goods
- Restrictions on the issue of bearer securities
- Restriction on settlement in another country
- Restriction on the holding of immovable property outside India
- Restrictions on the appointment of certain persons and companies as agents for dealing in foreign exchange
- Permission required from RBI for foreign nationals for practicing professions in India
- Restriction on the acquisition, holding, etc., of immovable property in India